A WINDFALL of extra corporation tax, amounting to €1.1bn, has enabled Minister for Finance Paschal Donohue to present a balanced budget for next year for the first time since the economic downturn started in 2007 and, just like The Late Late Show, once again, there is something for everybody in the audience with the ubiquitous fiver for all doing the rounds again.
Pensioners and social welfare recipients are to get an extra €5 a week from next year and PAYE workers should get this gross, but its net value will end up being not much more than the price of an extra cup of coffee in the week – hardly a great dividend for workers whose efforts are contributing towards growing the economy at quite a rapid rate. The government has established a ‘rainy day fund’ of €1.5bn with €500m to be added to it annually during the good times.
Some of the aforementioned extra corporation tax receipts will go towards paying off the massive €700m shortfall in the health budget for this year. It is good to see the allocation for the National Treatment Purchase Fund being increased by €20m in a bid to tackle waiting lists for medical consultations and treatment. Next year’s health allocation is a record €17bn and it probably still won’t be enough, given that efficiencies are anathema to that Department.
There is understandable disappointment in the tourism industry, especially in rural areas where business is more seasonal, that the special VAT rate for the hospitality sector will be increased from 9% back up to 13.5%. This flies in the face of a budget being touted as ‘Brexit-proofing’ the economy when one of the sectors most vulnerable to it is treated like this.
Some welcome measures to tackle the chronic shortage of housing include €1.25bn for 10,000 new social houses next year; extra provisions for the affordable housing scheme and the retention of the Help-to-Buy scheme for first-time buyers. However, there is nothing much to help the most vulnerable struggling with record high rents, a knock-on effect being people made homeless that heretofore would not have been.
Scandalously, the Minister has kicked the can down the road as regards measures to tackle climate change, apart from extending the relief on VRT for hybrid vehicles to the end of next year and adding 1% to the VRT rates for diesel vehicles. This is simply not good enough.
The last time there was an unexpected corporation tax windfall was in 2015 when some €250m was used to try to ‘buy’ votes ahead of the February 2016 general election. That did not work out very well for the outgoing government!
Fianna Fáil has undertaken to support the passage of the Finance Act to enact the Budget provisions. However, the Confidence and Supply Agreement has now come to an end and it will be interesting to see if it will be renewed and, if so, for how long.